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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2004 or

or

For the transition period from                      to                     

Commission file number 0-14050

THE SANDS REGENT

(exact name of registrant as specified in charter)

Registrant’s telephone number, including area code (775) 348-2200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.

Yes ¨ No x

On May 14, 2004, the registrant had outstanding 5,646,555 shares of its common stock, $.10 par value.

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THE SANDS REGENT AND SUBSIDIARIES

FORM 10-Q

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PART I FINANCIAL INFORMATION

THE SANDS REGENT AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THE SANDS REGENT AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THE SANDS REGENT AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE SANDS REGENT AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THE SANDS REGENT AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of The Sands Regent (the “Company”) and its wholly-owned subsidiaries: Zante, Inc. (“Zante”), a Nevada corporation, and Last Chance, Inc. (“Last Chance”), a Nevada corporation. Zante owns and operates the Sands Regency Casino/Hotel (“Sands Regency”) in downtown Reno, Nevada. Last Chance owns and operates the Gold Ranch Casino and RV Resort in Verdi, Nevada, and California Prospectors, Ltd. (“California Prospectors”), a Nevada limited liability company, which operates a California Lottery station. Together, Last Chance and California Prospectors are presented as (“Gold Ranch”). On May 1, 2004, the Company acquired 100% of the common stock of Plantation Investments, Inc. a Nevada corporation. Plantation owns and operates the Rail City Casino (“Rail City”) in Sparks, Nevada.

The accounting policies followed in the preparation of the financial information herein are the same as those summarized in the Company’s 2003 Form 10-K. The consolidated balance sheet at June 30, 2003, was derived from the audited consolidated financial statements at that date. The interim consolidated financial information is unaudited and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2003. In the opinion of management, all adjustments and normally recurring accruals necessary to present fairly the financial condition of the Company as of March 31, 2004, and the results of its operations and its cash flows for the three and nine months ended March 31, 2004 and 2003 have been included. Interim results of operations are not necessarily indicative of the results of operations for the full year due to seasonality and other factors. Reclassifications have been made to the prior period’s consolidated financial statements to conform to the 2004 presentation.

NOTE 2 - EARNINGS PER SHARE

The Company reports “basic” earnings per share and “diluted” earnings per share in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share”. Basic earnings per share is computed by dividing reported net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially dilutive securities such as stock options. On March 25, 2004, the Company issued $1.6 million in convertible debt, which can be converted into 246,012 shares of common stock, and issued a warrant, which can be exercised for 100,000 shares of common stock. As of March 31, 2004, the convertible debt and the warrant have no impact to dilutive earnings and dilutive earnings per share. The following is a reconciliation of the number of shares (denominator) used in the basic computations (shares in thousands):

In the three and nine months ended March 31, 2004, there were no antidilutive shares, the exercise price of all vested shares exceeded the weighted average stock price for these periods.

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THE SANDS REGENT AND SUBSIDIARIES

NOTES TO CONDENDES CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 3 - BUSINESS SEGMENTS

The Company reports business segment information based on geographic location. The following is a breakdown of relevant data by location. (Dollars in thousands)

NOTE 4- ADOPTION OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Financial instruments that are within the scope of the statement, which previously were often classified as equity, must now be classified as liabilities. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement did not have a material effect on the Company’s results of operations or financial position.

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THE SANDS REGENT AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 5 - STOCK OPTION AND STOCK INCENTIVE PLANS

The Company accounts for its stock option plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. No stock-based compensation expense was reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. If the Company had elected to recognize compensation cost based on their estimated fair market value at the grant dates for awards granted under the stock option plans, consistent with the method prescribed by Statement of Financial Accounting Standards (“SFAS No. 123”), “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148 - “Accounting for Stock-based Compensation - Transition and Disclosure”, using the Black-Scholes option pricing model, our net income and earnings per share would have been as follows:

NOTE 6 - GAIN ON NOTE RECEIVABLE

On November 13, 2003, the Company reached an agreement with Gulfside Casino Partnership (d/b/a the Copa Casino in Gulfport, Mississippi), regarding a final settlement of amounts owed to The Sands Regent pursuant to a non-interest bearing promissory note issued to the Company in connection with its December 1998 sale of its interest in the Copa Casino. The terms of the note required a monthly payment to the Company in an amount equal to the greater of $15,000 or 2% of the Copa Casino’s gross gaming revenues (4% beginning July 2004) until the note is paid in full. At the time of the settlement, the unpaid balance of the note was $5.0 million. On November 28, 2003, the Company received a $4.0 million cash payment as final settlement under the note. The Company had not previously recognized a gain on the settlement amount due primarily to the Company’s uncertainty of the Copa’s current management’s ability to obtain long-term financing, as well as competitive, legal, financial, environmental and various other risks facing the casino. As a result, in December 2003, the Company recognized a gain for the full settlement amount of $4.0 million plus debt service payments of $387,000 made during the period.

At the time of the Copa Casino’s sale, the Company’s tax basis in the Copa Casino was $7.3 million. The full value of the note, $8.0 million, and the $500,000 initial cash payment, were recorded for tax purposes without an allowance for uncollectibility. This created a deferred tax gain of $1.2 million. For tax purposes, no gain is realized on the settlement amount as all proceeds have been applied first to the deferred gain and then to the Company’s tax basis in the property. Further, a tax benefit of $348,000 has been recognized on the $1.0 million forgiven under terms of the settlement, further reducing the tax provision for the nine months ended March 31, 2004.

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THE SANDS REGENT AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 7 - DEBT AND EQUITY FINANCING BY PRIVATE INVESTOR

On March 25, 2004, the Company completed a financing arrangement by which it issued to a private investor (i) 500,000 shares of common stock for $5.22 per share, (ii) a warrant to purchase up to 100,000 shares of common stock at exercise price of $7.82 per share, and (iii) a secured convertible note in the amount of $1,604,000, with a conversion price of $6.52, and convertible into 246,012 shares of common stock.

NOTE 8 - SUBSEQUENT EVENTS

On December 8, 2003, the Company announced the signing of an agreement to purchase 100% of the common stock of Plantation, Investments, Inc. dba Rail City Casino in Sparks, Nevada, from Alliance Gaming Corporation. On May 1, 2004 the Company took over operations of the casino. The final purchase price is still being determined, but is anticipated to reach the previously negotiated cap of $37.9 million, plus costs and other fees, and plus or minus a working capital adjustment. The purchase was financed by debt and equity financing by a private investor and through new bank credit facilities. Additionally, the Company issued a $.9 million, 3-year, 11% interest per annum, subordinated note payable to Alliance Gaming Corporation, the seller of the Rail City property.

In connection with the Company’s purchase of Rail City Casino, the Company executed a syndicated financing arrangement (“Credit Agreement”) through Wells Fargo Bank. The Credit Agreement provides for a 5-year, $20,000,000 term loan collateralized by substantially all property and equipment of Zante, Inc. and Plantation Investments, Inc., and the furniture, fixtures, and equipment of Last Chance, Inc. The note has a variable interest rate based on LIBOR or the U.S. Prime Index plus an applicable margin as detailed in the Credit Agreement. The initial interest rate will be LIBOR plus 4% or Prime plus 2.5%. The loan assumes a 5-year amortization schedule, and matures on May 1, 2009 with interest and any unpaid principal due and payable on that date. Additionally, as part of the Credit Agreement, the Company secured a Wells Fargo Bank syndicated, 5-year, $22,000,000 revolving credit facility with collateralization and terms which are substantially similar to the term loan. The loan requires interest only payments and matures on May 1, 2009 with interest and any unpaid principal due and payable on that date.

The previous bank loan with a balance of $2.4 million on March 31, 2004, was paid in full in May 2004. This loan had deferred loan fees of approximately $275,000, which will be expensed in the fiscal quarter ended June 30, 2004.

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THE SANDS REGENT AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Sands Regent and its subsidiaries (the “Company”) operate the Sands Regency Casino Hotel (the “Sands”) in downtown Reno, Nevada and the Gold Ranch Casino and RV Resort (the “Gold Ranch”) on Interstate-80 in Verdi, Nevada. The Sands has 830 hotel rooms and 5 restaurants including Tony Roma’s Famous for Ribs, Mel’s the Original diner, and Arby’s. It has a full selection of gaming alternatives, including 594 slot machines, 19 table games, keno, bingo, and a sportsbook operated by Leroy’s Race and Sportsbooks, a third party. Additionally, the Sands has a ‘Just for Laughs’ comedy club, a cabaret lounge, health spa, and a large outdoor pool. The Company acquired Gold Ranch on June 1, 2002. Gold Ranch’s gaming alternatives include 260 slot machines, a California lottery station on Gold Ranch’s property which straddles the Nevada/California border; and a Leroy’s sportsbook. Additionally, Gold Ranch has a 105 space RV park, 2 restaurants (a 24-hour family style restaurant and a Jack-in-the-Box), and an ARCO gas station and convenience store. The Company also owns a slot machine route with 17 locations in the Reno area.

On May 1, 2004, the Company acquired the Rail City Casino (“Rail City”) in Sparks, Nevada. Rail City Casino has approximately 16,600 square feet of gaming space housing 600 slots, 7 table games, keno, a Leroy’s sportsbook, a family-style restaurant and a sports bar. Rail City caters to a predominately local clientele. The exact purchase price of the acquisition is still being determined but is anticipated to be approximately $37.9 million, consisting of approximately $37 million in cash and an a $.9 million subordinated note issued to the seller.

Critical Accounting Policies and Estimates

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Certain of the Company’s policies, including the estimated lives assigned to long-lived assets, asset impairment, goodwill and other intangibles impairment, the adequacy of our allowance for uncollectible receivables, self insurance reserves, litigation reserves, and customer rewards program liability requires that the Company apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company’s judgments are based on historical experience, terms of existing contracts, observations of trends in the industry, information provided by customers and information available from other outside sources, as appropriate. There can be no assurance that actual results will not differ from Company estimates.

Results of Operations- Three months and nine months ended March 31, 2004, as compared to the three and nine months ended March 31, 2003.

CONSOLIDATED RESULTS. For the three months ended March 31, 2004, the Company’s net revenues increased from $12.5 million to $13.2 million, or 5.4%, from the three months ended March 31, 2003. However, Gold Ranch net revenues were down 6.9% from the prior year quarter due in part to 3.4% less traffic on Interstate 80, as measured by the Nevada Department of Transportation, and due to an usual and unstable gasoline market in northern California and northern Nevada. In the quarter ended March 31, 2004, gasoline gallons sold at Gold Ranch were down 11.2% from the March 2003 quarter. On the other hand, air traffic was materially higher for the March 31, 2004 quarter as compared to the same quarter of last year, and net revenue increases at the Sands Reno property more than offset the net revenue shortfall experienced by Gold Ranch.

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THE SANDS REGENT AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the nine months ended March 31, 2004, consolidated net revenues increased from $40.6 million to $41.8 million, or 2.9%, from the comparable nine month period of the prior year. Net revenues at Gold Ranch had been running substantially higher for the current fiscal year, as steadily increasing gasoline prices bolstered revenues but did not adversely effect customer volumes or gasoline gallons sold until the last month of the December 31, 2003 quarter. The lower volumes generally prevailed throughout the March 31, 2004 quarter. Company management believes unusual market forces were at work, which were not typical.

Consolidated income from operations was $145,000 for the quarter ended March 31, 2004 compared to $194,000 for the same quarter of the prior year. Despite the slight net revenues increase, income from operations decreased due primarily to higher taxes imposed by the 2003 Nevada legislature, costs associated with new special promotions, and increased depreciation. The Company focused on enhanced marketing and promotions to attract the large American Bowling Congress tournament visitors in Reno from February through June 2004, and to counter the potential adverse effects of the new California Native American casinos and the effects of the railroad trench construction (ReTRAC) adjacent to the Sands.

For the nine months ended March 31, 2004, consolidated income from operations was $2.1 million compared with $2.7 million for the comparable nine months of the prior year. The $624,000 decrease resulted primarily from new taxes and special promotions and advertising costs aimed at achieving two goals: a) maintain and enhance its marketing presence in the Northern California feeder market as a response to the opening of the Thunder Valley Casino and b) maintain the Sands local marketing presence to counter traffic and parking problems associated with ongoing roadwork nearby related to the new downtown railroad trench project also known as ReTRAC. (See “Other factors affecting current and future results” later in this section.) Additionally, in the nine months ended March 31, 2004, the Sands spent $80,000 on legal fees contesting the ReTRAC settlement.

Net income was $30,000, or $.01 per share (basic and diluted) for the three months ended March 31, 2004 and $5.4 million, or $1.06 per share ($1.01 diluted) for the nine months ended March 31, 2004. These results compare to consolidated net income of $77,000, or $.02 per share ($.01 diluted) for the three months ended March 31, 2003, and net income of $1.2 million, or $.24 per share ($.23 diluted) for the nine months ended March 31, 2003. The large improvement in the nine month net income was due to payments received by the Company of $4.4 million on a previously fully-reserved note receivable the Company possessed in connection with its December 1998 sale of the Copa Casino (see “Gain on previously reserved note receivable” below).

SANDS REGENCY HOTEL AND CASINO. The Sands experienced 15.2% higher net revenues in the quarter ended March 31, 2004, $8.0 million, compared with the quarter ended March 31, 2003, which were $7.0 million. Gaming revenues were higher by $524,000, or 10.5%, as the Sands benefited from the men’s American Bowlers Congress triennial tournament, which came earlier and in larger numbers than last year’s Women Invitational Bowlers Congress triennial tournament. Further, the Sands picked up some patronage from the closed Sundowner Casino, which is situated adjacent to the Sands. Factors moderating the downtown Reno property’s results included the ongoing work on the downtown railroad trench (ReTRAC project), increased competition from Native American casinos, and high fuel prices.

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THE SANDS REGENT AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the nine months ended March 31, 2004, net revenues for the Sands increased from $24.1 million in the prior year to $24.6 million in the current year. Due to a historically strong March 2004 quarter in what is typically a seasonally slow period, the Sands gaming revenues turned higher for the nine months ended March 31, 2004, $16.0 million for the current year compared with $15.7 million for 2003. Prior to the current quarter, the fiscal year’s net revenues had been tracking lower primarily attributable to the fiscal first quarter, which was weakened by the disruptive ReTRAC project as well as anecdotal evidence which suggested many customers in the northern California feeder market gave trial to the newly opened Thunder Valley Casino in nearby Rocklin, California and arrived in Reno with smaller than normal gaming budgets.

Lodging revenues were higher for the three months ended March 31, 2004, $1.8 million compared to $1.5 million for the same period of the prior year, and were higher for the nine months ended March 31, 2004, $6.4 million compared to $6.2 million for the comparable period of the prior year. The Sands’ average room rates were virtually flat compared to last year in both the three and nine month comparisons. The primary reason for the lodging revenue increases was an additional 3,800, or 6.4%, more rooms sold in the quarter and an additional 5,500, or 2.9%, more rooms sold in the nine months ended March 31, 2004 as compared to the same periods of the prior year.

The Sands’ income from operations was $152,000 for the quarter ended March 31, 2004, as compared to a loss of $110,000 for the quarter ended March 31, 2003. The expense margin for the Sands improved from 101.5% to 98.1% in the quarter-to-quarter comparison mainly due to changes in the Sands management structure and a smaller projected management bonus.

For the nine months ended March 31, 2004, the Sands had income from operations of $1.2 million, compared to $1.5 million for the nine months ended March 31, 2003. Despite the quarterly results which were better than last year, the expense margin for the nine month period ended March 31, 2004 was still behind the prior year, 93.8% compared to 95.3%. The decline in the Sands’ income from operations for the nine months ended March 31, 2004, compared to the corresponding period of the prior year was primarily due to the Sands not achieving the economies of scale associated with the heavy customer volumes experienced in the summer of 2002, increased marketing and advertising costs during the current fiscal year, new taxes enacted by the 2003 Nevada Legislature, and increased depreciation costs.

The following table highlights the Sands’ sources of revenues and expenses for the:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GOLD RANCH CASINO AND RV RESORT. For the three and nine month periods ended March 31, 2004, Gold Ranch had net revenues of $5.1 million and $17.3 million, respectively. This reflects a decrease from the $5.5 million net revenues in the comparable quarter of last year, but an increase from the $16.6 million in net revenues for Gold Ranch in the respective nine month period of 2003.

Gold Ranch revenues can be significantly influenced by the price of gasoline because of the property’s high volume ARCO gas station and convenience store located on I-80, the major thoroughfare between Reno and California. The average retail price of a gallon of gasoline was $1.82 for the quarter ended, and $1.75 for the nine months ended, March 31, 2004. This compares with an average price of $1.73 and $1.54 for the respective three and nine month periods in 2003. Gasoline gallons sold were down 11.2% for the quarter and 2.3% for the nine months ended March 31, 2004, due in part to 3.4% less traffic on Interstate-80 during the quarter as compared to last year and due to unusually competitive gasoline pricing on the I-80 corridor in California.

Gaming revenue for Gold Ranch is comprised of slot machine revenue and, to a lesser degree, revenue from a California Lottery station. Gaming revenue decreased from $1.4 million for the quarter ended and $4.4 million for the nine months ended, March 31, 2003; to $1.2 million for the quarter ended and $4.2 million for the nine months ended March 31, 2004, decreases of 9.0% and 3.0% respectively and similar to the percentage decreases experienced in gasoline volume.

Gold Ranch income from operations for the quarter ended March 31, 2004 was $168,000, a decrease from $366,000 for the quarter ended March 31, 2003. For the nine months ended March 31, 2004, income from operations was $1.2 million, a decrease from the $1.4 million for the nine months ended March 31, 2003. New direct mail programs and other promotions increased costs and generated volume, but did not completely offset the volume declines caused by higher gasoline prices and competition from Native American gaming in Northern California. The following table highlights Gold Ranch’s sources of revenues and expenses for the: